1.0/2.0 politics in a 3.0 economy

The two terrific articles on manufacturing in America I wrote about in my last post dramatically demonstrate how futile it is to try to recreate a mass middle class in a factory-based economy. Those days are gone. Factory work is no longer a source of long-term job growth. Nor of mass middle class jobs.

As reported by the New Times in an article entitled Factory jobs gain, but wages retreat: “But for a new generation of blue-collar workers, even those protected by unions, the price of employment is likely to be lower wages stretching to retirement. … The shrunken pay scale for newcomers — $12 to $19 an hour versus $21 to $32 an hour for longtime workers — threatens to undo the middle-class status of even the best-paid blue-collar jobs still left in manufacturing.”

But it doesn’t stop politicians – from both parties – trying. In fact, centering their economic strategies for the country and state on recreating that economy. Most Republicans are advocating policies for a 1.0 (farming and oil, gas and coal extraction) and 2.0 economy (factories) with low wages and a small safety net. And the Democrats the same economy but with high wages and a large safety net. The Democrats want alternative/green energy products (batteries, solar panels, wind turbines, etc.) to be a core of a renewed factory-based economy.

Even Governor Snyder – who understands better than any elected official in Michigan the importance of moving to Michigan 3.0 – centered his State of the State address on 1.0 and 2.0 industries. In an insightful post Rick Haglund writes: “Still, the speech was a disappointment to those looking for details on how Snyder intends to continue implementing what he calls “Michigan 3.0″–the era of innovation. Strangely, he spent time praising the economic growth of sectors from Michigan 1.0 and 2.0–agriculture, manufacturing, mining and tourism. No mention at all of knowledge jobs in health care, financial services, and business, professional and technical services. And no discussion of whether the governor will propose using some of the budget surplus on new investments in education and cities.”

As we have documented in our annual progress reports on MIchigan’s economy, if the state’s economy (the country’s too) is anchored in “agriculture, manufacturing, mining and tourism” we are going to be both a slow employment growth and low income state. Is that what we want?

Both job growth and high wage are increasingly concentrated in knowledge-based sectors. As New York Times columnist Tom Friedman writes:

In a world where the biggest returns go to those who imagine and design a product, there is no higher imagination-enabling society than America. In a world where talent is the most important competitive advantage, there is no country that historically welcomed talented immigrants more than America. In a world in which protection for intellectual property and secure capital markets is highly prized by innovators and investors alike, there is no country safer than America. In a world in which the returns on innovation are staggering, our government funding of bioscience, new technology and clean energy is a great advantage. In a world where logistics will be the source of a huge number of middle-class jobs, we have FedEx and U.P.S.

If only — if only — we could come together on a national strategy to enhance and expand all of our natural advantages: more immigration, most post-secondary education, better infrastructure, more government research, smart incentives for spurring millions of start-ups — and a long-term plan to really fix our long-term debt problems — nobody could touch us.

That is the economy and the agenda we need to pursuing. It is the only reliable path to a future America with a broad middle class. But to get there will take a complete reorientation of the policy agenda of both parties. As long as we are debating which party can best restore the economy that is being obliterated by globalization and technology the country and Michigan are going to get poorer.

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

This Post Has 2 Comments

Hello All,
While I agree with the notion that it is a sort of fools errand to seek a return to an economy based on the old factory jobs, that is not the whole story.

In his 2011 book called Making it in America Dow CEO Andrew Liveris aptly points out that without factories (even highly automated ones) the crucial better paying R&D knowledge work/jobs are in great jeopardy

Keeping factory work in America should be our goal. But it almost for sure is going to look a lot like farming. Few workers with machines doing most of the work. And the lower skill work will not pay great. Certainly no longer the mass middle class jobs the backbone of the 20th Century middle class. The “we can’t keep the pre production jobs if we lose the production jobs” is the real unknown. Edward Glaeser in the Triumph of the City makes a compelling the case that because of digital communications the two can be separate. So far that is true. But Andy Grove, amongst others, makes the opposite case. I wrote a set of posts on the Grove article that makes the case for protectionism to protect factory jobs because I think this is a really important topic that needs to be taken seriously.